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Can You Knock Down and Rebuild a House With a Mortgage

Can you demolish a house with a mortgage? Other answers will be a firm no, you can’t demolish your house with an existing mortgage because one, you can’t use a house that has been demolished as collateral anymore on a construction mortgage.

So you need to pay the first payment of the mortgage and you can acquire a construction mortgage.

Excavator demolishing a building - Big Easy Demolition If you did not consult with your mortgage lender first you can suffer the consequences of violating your mortgage loan agreement, loss of your property, and other legal actions that can be served.

To demolish your existing house you also would need to check with the laws in your state as they can differ from state to state.

In order to demolish your house you should obtain building authority approval.

Next, you should consult with your bank or mortgage lender if they still have an interest in maintaining their security with your property and the contract.

You will need to acquire their consent in order to do so, and last, you should read and study the mortgage agreement that you signed if they are inclined to maintain their security if you choose to go ahead and demolish your house.

Existing Mortgage in a House

Can you demolish a mortgaged house? If you have a house demolition with an existing mortgage the bank has a rightful claim to your property that would be equal to the balance of your mortgage.

Essentially, you can not demolish your house if it is the property of the bank.

If you demolish your house then what happens is that the bank can no longer have collateral on your loan or the money that you owe.

Excavator destroying brick house - Big Easy DemolitionHowever, if you suddenly stopped paying, the bank can take no action unless they can seize your other assets of value but this is unlikely to happen as they would want the house first.

When you signed the mortgage, you signed a contract and other legal documents that you agreed to pay for your house, which includes everything that is existing in the property as well as the land that it stands on and you have no choice but to honor that contract.

If you earn more than enough money or cash to build another house on the same property at the same time, continuously paying for the original mortgage, you should consider entering into a new mortgage so that you can build the house that you are planning to do.

However, if that is possible from your mortgage lender, such as the bank, the bank can produce the money needed. If you would ask them too, it doesn’t hurt to ask if it can happen.

Can you knock down and rebuild a house with a mortgage?

If you really want to demolish your house, it is difficult to do that with just a normal mortgage, however, there exist such special mortgages that will allow you to demolish your house.

You should schedule a meeting with your mortgage broker to discuss your choices so that you can choose between different options on what is best for you to find the right kind of mortgage.

Moreover, you can as well consult with another mortgage broker in order to acquire a private mortgage if it means that you can be allowed to demolish your house even when you are still paying off your mortgage.

The process of demolishing a house with a mortgage

Before demolishing a house

  1. Acquire a permit

    The first step in demolishing a house is to obtain a permit.

    Check with your local government such as your city or county officials.

    You will need to do so because you will need huge heavy machinery such as a bulldozer that will take away big pieces of your house and smash concrete debris into rubble which will be bound for attention in your neighborhood.

  2. Check with your utility companies

    Before doing any real demolishing, check with your utility companies as your house is still attached to gas, water or electricity that need to be taken care of before going down with the house as dangerous leaks can happen.

    Utilities that have wires and pipes need to be closed or removed in order to have an orderly demolition.

    Have a representative of your utility or fire department come and inspect the area.

  3. Check for toxic and hazardous materials

    Asbestos, a hazardous material, is often found in older homes and is normally found on the floor and ceiling. The asbestos can be wrapped around ductwork and is found in siding. Older homes that are made 30-plus years ago often have hazardous materials built in them so have an expert come and inspect around.

  4. Consult with your mortgage lender

    The best thing to do is to consult with your mortgage as this is important that they know that you are demolishing your house.

    The lender or the bank has an interest in your property so you can not demolish that property without them knowing or obtaining their consent.

Financing the demolition of your home

Financing the demolition of your house will be a long and complicated process as you need to figure out the cost of your property, the cost of the whole complete demolition process and you need to obtain long-term mortgage financing.

Unless you are sitting on a pile of wealth and have more than enough money to go around, you will be needing money to finance the tearing down of your house.

Some options are using the money from the sale of your old house and you can buy the tear-down property-based on the sale.

The labor costs of demolition are influenced by various factors such as the size of the house and where your house is located.

You can be expected to shell out between $8,000- $20,000. You can also recycle what is left of the structure such as any concrete for future use.

More from Big Easy Demolition

The 5 Benefits of Recycling Demolition Debris
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Big Easy Demolition is a licensed and insured company providing demolition services for both homes and businesses.

We proudly serve the areas of Metairie, Slidell, New Orleans, Kenner, Laplace, and all throughout the Greater New Orleans area.